Just when Asian market participants are starting to close shop, their European counterparts are just beginning their day.
While there are several financial centers all around Europe, it is London that market participants keep their eyes on.
Historically, London has always been at a center of trade, thanks to its strategic location.
Today, London benefits from its timezone. London’s morning overlaps with late trading in Asia and London’s afternoon overlap with New York City.It’s no wonder that it is considered the forex capital of the world with thousands of folks making transactions every single minute.
About 43% of all forex transactions happen in London.
Some traders also refer to the London session as the “European” trading session.
That’s because aside from London, there are major financial centers open in Europe as well, such as Geneva, Frankfurt, Zurich, Luxembourg, Paris, Hamburg, Edinburgh, and Amsterdam.
Below is a table of the London session pip ranges of the major currency pairs.
These pip values were calculated using averages of past data. Take note that these are NOT ABSOLUTE VALUES and can vary depending on liquidity and other market conditions.Also, the session range for EUR/CHF has not been included since the Swiss franc has been pegged to the euro at 1.2000 during the period.
Here are some neat facts about the European session:
- Because the London session crosses with the two other major trading sessions–and with London being such a key financial center–a large chunk of forex transactions take place during this time. This leads to high liquidity and potentially lower transaction costs, i.e., lower pip spreads.
- Due to the large number of transactions that take place, the London trading session is normally the most volatile session.
- Most trends begin during the London session, and they typically will continue until the beginning of the New York session.
- Volatility tends to die down in the middle of the session, as traders often go off to eat lunch before waiting for the New York trading period to begin.
- Trends can sometimes reverse at the end of the London session, as European traders may decide to lock in profits.
Which Pairs Should You Trade?
Because of the volume of transactions that take place, there is so much liquidity during the European session that almost any pair can be traded.
Of course, it may be best to stick with the majors (EUR/USD, GBP/USD, USD/JPY, and USD/CHF), as these normally have the tightest spreads.
Also, it is these pairs that are normally directly influenced by any news reports that come out during the European session.
You can also try the yen crosses (more specifically, EUR/JPY and GBP/JPY), as these tend to be pretty volatile at this time. Because these are cross pairs, the spreads might be a little wider though.
Next up, we have the New York session, a jungle where dreams are made of. Hey, isn’t that an Alicia Keys song?